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New website meant to shine light on underground segment of condo sales

A veteran Toronto real estate agent is launching a new MLS-like website aimed at opening up the underground condo assignment market.

The new site, AssignmentListingService.com, is meant to provide a centralized listing of assignment units now largely being sold via word of mouth or through unregulated online sites such as Craigslist and Kijiji.

For now, it’s largely restricted to realtors for a fee but, over time, it’s hoped more public listings will be accessible to the public as resale properties are now on Realtor.ca

“What we’re trying to do is add some transparency to the process,” says Jamie Johnston of downtown’s ReMax Condos Plus Corp. “I don’t know how big this is going to be, but it’s important it be an orderly market.

“Right now it’s the Wild West.”

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Assignments are typically brand new condos or units still being built that buyers purchased years earlier in the preconstruction phase. By “assigning” — or flipping — them to new buyers before the project is fully occupied and registered, the initial buyer is able to pocket considerable profits and pass some or all of their closing costs to the new buyer.

The new buyer gets the benefit, in many cases, of being able to actually walk through a never-lived-in unit rather than having to buy from blueprints, although the uncompleted building can still be, as Johnston puts it, “a war zone.”

The secondary buyer can also snag a bit of a bargain: Assignments tend to sell below market value, or at least they did before condo prices started slipping last fall.

But these deals can also be complex and risky and the sector largely unregulated. Many realtors and lawyers avoid assignments because the contracts and fees are far more complicated than normal resale deals.

It can also be more difficult to determine the real value of the units because any comparables sold in the building seldom show up on the resale Multiple Listing Service.

On top of that, most developers’ contracts forbid initial purchasers from marketing their units on MLS or other online services, for fear they will compete with any units the builder has yet to sell.

Some developers charge $5,000 to $7,000 for the right to assign units.

Many allow it free but forbid marketing the units on MLS or other public online services. Buyers found violating that rule can have their units seized and lose their deposits, but developers usually back down as long as the unit is pulled off public sites, says real estate lawyer David Feld.

Johnston anticipates that up to 8,000 assignment units could come on the market annually across the GTA over the next few years as developers start to build the record 28,000 condo units sold in 2011. Market research firm Urbanation believes the real number will be substantially lower than that as buyers opt to hold on and rent out units in the softening market.

Johnston’s aim is to not only provide a centralized listing service for assignments, but also real estate and legal experts knowledgeable about the specifics of this small but important segment of the growing condo market.

He believes that because AssignmentListingService.com is quite different and separate from the resale MLS computer listing service, it won’t violate most developers’ rules.

Feld isn’t so sure, as someone who’s seen the assignment market from both sides — he’s handled many such deals and is now quietly trying to find a buyer for a brand new townhouse he bought in the preconstruction phase.

“They aren’t voodoo. You’re getting something new with the added bonus of actually seeing it first,” says Feld. “But, ultimately, it’s the builder that is in control.”

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